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BEIJING : China's inflation hit a near 12-year high of 8.7 percent in February, the government said Tuesday as it called for a "cool-headed" response to one of the nation's most pressing economic concerns.
The figure, issued by the National Bureau of Statistics, marked the steepest rise in consumer prices since May 1996 and showed China's policy makers falling further behind in their efforts to keep inflation to 4.8 percent this year.
Food prices, the main driver of inflation, were up 23.3 percent in February from a year earlier, according to the bureau. The price of pork, the nation's favourite meat, was up 63.4 percent.
By contrast, non-food prices were up by a mere 1.6 percent in February from a year earlier.
In a rare comment attached to the end of its statement, the National Bureau of Statistics called for a calm reaction to the February data, which followed a rise in the consumer price index of 7.1 percent in January.
"We must remain cool-headed, assess the situation correctly and adopt efficient measures in order to conscientiously keep the overall price level from rising too fast," the bureau said.
Coming just days after the central bank governor said there was room for hiking interest rates further, analysts said they expected a broad monetary policy response.
"We believe policymakers will likely react to the inflation data with a combination of tightening tools," investment bank Goldman Sachs said in a research note.
These tools may include not just a modest interest rate hike, but also an increase in the money banks must keep in reserve, tightened controls on lending and faster appreciation of the currency, Goldman Sachs said.
China had already raised interest rates six times last year, while lifting the bank reserve ratio 11 times since the beginning of 2007.
The stock market reacted immediately to the release of the inflation data, with the benchmark composite index down 1.40 percent from Monday's close just minutes after the figures were out.
"The impact on the market was obvious, and the inflation figure got investors thinking monetary policies may tighten, and we might even see a rate hike," said Zhang Xinfa, an analyst at Galaxy Securities.
In an address to parliament last week, Premier Wen Jiabao said the government's inflation target for this year was 4.8 percent, as he listed soaring prices as the top worry for China's 1.3 billion people.
"The current price hikes and increasing inflationary pressures are the biggest concern of the people," Wen said.
Inflation in China was 4.8 percent in 2007, the steepest rise in 11 years, as the economy expanded by 11.4 percent over the 12 month period.
For China's communist rulers, inflation is of particular concern because it threatens to lead to social unrest and fuel anger at the government, as was the case in the lead-up to the 1989 democracy protests that the military crushed.
- AFP/vm
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